Greedy Goblin

Saturday, July 25, 2009

I can't believe I'm writing this

I've wrote so many times about undercutting that I can't even count it, yet there are still people who don't get it. On slow weekends I post fun pictures about idiots "teaching noobs" not to undercut wasting "common profit". And some commenters come and say they are right.

OK, welcome to the elementary school. (If the undercutting is obvious to you, don't keep reading.)

There are two kind of "price fixers". The first is not surely wrong (for himself), just ineffective. He suggest to undercut just by silvers. Of course the silver-undercutting war is won by the one who spends the most time by the AH. However the point of going to the AH instead of grinding elementals is exactly to save time. If you camp the AH 10 hours a day to always relist your stuff when undercut, your gold/hour ratio falls to the region of double gatherers. By undercutting several golds, you simply force the competition to either abandon their precious gold and undercut you or list on "normal" price and then your stuff will sell.

The other price fixer is simply stupid. He believes that if all sellers would sell for the same price, the buyers would be forced to buy for that price. In that, he is right. However he is very wrong in three things. At first there is no way to make all sellers agree. Just because you agree with the price, a third seller could come and take it all. The fun part is that this third seller could be the alt of any of you.

In the real world when participating a market can have serious entry cost, such schemes can work for a time. You can't build an airliner overnight. However you can craft glyphs overnight, so if the price is fixed high, someone will come and steal the show. The only way to prevent this if it's you who steal the show.

Secondly, no market is price-indifferent. If the stuff is too expensive, people simply won't buy it. Smart people have stocks and know crafters in their guild, dumb won't mind going to raid in PvP glyphs if PvE glyphs are too expensive. And there are always poor who simply cannot pay. So the higher prices mean less sells.

Thirdly and most importantly price fixing means accepting only a little share of the market. Having 10-20% of the 50G/glyph profit is worse than having 80% of the 20G/glyph profit.


Of course there comes the uber-genious who thinks the best move is buying all "cheap" glyphs and sell them higher. While monopoly works sometimes, but never-ever on an item that can be mass-produced. If you see someone buying all glyphs (or armor kits or belt buckles or ammunition or whatever that can be mass-produced), just craft much more. Make him buy more and more, making you rich and making him overrun by unsellable stuff.


PS: many commenters said that in servers with little competition, no AH-players one can pull this trick. I've never claimed differently. However those who wrote letters to others to fix prices are surely idiots since someone is surely a competitor: the one who received the letter.

50 comments:

Yaggle said...

Many people believe that there is a system where everybody is a winner. They think everybody can charge high prices and charge the same price, so everybody wins. This is denial of the natural way of things. There must be losers and the price-fixers should be the losers. So I hope everybody does what you say here. Usually I agree with you 80 or 90 percent but I agree with this one 100 percent. I would also like to add that I think price-fixers are traitors to their faction because by fixing prices and keeping them high, they are making goods harder to obtain for everybody who uses their faction auction houses. I realize that this last point is a non-goblinish abstract concept, but I find it added motivation to think I am working for a cause.

Mexican Goblin said...

I do disagree with the mass buying, as I have done it and made my fisrt few thousand to start my industry that way.

People who are leveling a profession tend to mass produce an item and go and sell on whatever their never updated auctionner tells them to. So they end up selling at half the market price or lower. I just buy these and relist at market price. Works like a charm and helps you get started when yhou're short of cash.

As I wrote to you once gevlon, people in my server sell, in a couple silvers glyphs worth a little over 1g. Their loss, my win.

Kwitch said...

Read most of your blogs, and I admit this one is right on the money. Flipping auctions is a poor man's game in any sense. As you've gone into detail numerous times, it's all about outsmarting your market opponents and taking what they give freely.

It's really good to see you focusing more on auction house psychology, although I find your musings on social trends that leak into wow insightful. I tip my hat to you.

vlad said...

"hile monopoly works sometimes, but never-ever on an item that can be mass-produced. (...)Make him buy more and more, making you rich and making him overrun by unsellable stuff."

gotta love these fools that heard about the "pet market" and want to try it without oingANY research, trying to buy all my pets...for 40g BO each =)

Thunderhorns said...

The only undercutting I think is foolish is undercutting below material value. For example, I dealt with a bullet maker who cut so low he was selling for less than he could sell the mats for if the mats were being sold for a low price for the week. I knew this guy couldn't be buying mats off the AH and selling bullets because he would have made no money. He would have lost money including the AH cut.

If you're going to farm anyway, why sell a manufactured item below materials cost? Some people say to control the market, but it doesn't accoplish that end unless all other sellers give up. Maybe most will, but I just waited for dunder head to sell out and get back to farming materials and sold my bullets for a better price.

Farming is always more time consuming than buying mats off the AH. But some people are so dumb they sell manufactured items they spend hours farming for for less than they could sell the mats for. That's just an ignorant way to run a business. But in a game like WoW with free and nearly unlimited natural resources, farmers can get by doing it even if they never become aware they are costing themselves coin by selling manufactured items for less than material costs. But they probably never bother to check anyhow.

Undercutting to the bone is expected. It's what real businesses do to make the barrier for entry so high that other players in the market will have to have deep pockets to enter and compete in their market.

But in Wow where there is no such barrier, it's just foolish to sell below material cost when you spend hours farming mats.

Daniel said...

There are ways to influence market prices in directions you like them.

Like putting floor on the price of eternal earth - if you manage to achieve buying all cheap earth and leaving the only the expensive on the AH some fun things happen - 1. Price of infinite dust goes up. 2. Price of jewels goes up (since JC can no longer rely on the recycling of green quality gems into infinite dust they must sell their cuts and raws higher). You sell cheaper dust and raw gems = proft.

Desmentia said...

I have to disagree with you because you haven't properly considered a factor foreign to your server. You are assuming that there is competition at all.

I play on a backwater server on the ass of the US realm list. A medium population server, the horde are so heavily outnumbered that the alliance have won Wintergrasp over 70% of the time. The north end of Dalaran doesn't lag, Horde first Yogg25 and Algalon both are still available.

When I list glyphs, I can fix the price at whatever I like. I like 75g because there is no competition, and everything I post sells before I come back to the AH.

When I list Netherweave Bags, I can fix the price at whatever I like because the demand vastly exceeds the supply, I only must compete with Frostweave.

The list goes on and on of things that really don't work as they should. Things are "messed up". And in goblin, "messed up" means "profit".

Wooly said...

At first I believed you on this fact Gevlon, but reality on my server has proven that this doesn't work. In fact I dare to say that heavy undercutting is the worst thing you can do if you are playing against other goblins.

If I had my own blog I would write a response there, because I have a lot to say about it. I'll just waste your space now. I'll try to keep it short.

I don't know if it's the mass of people who read your or similar blogs, but that big undercutting thing you are proposing is almost a hype on my server. ATM I've got every profession except engineering, so I have a reasonable view of the complete market (costs me a hell of a lot of time, so I'm now sticking with 2 professions as main sellers).

I have, and I've been undercut by massive amounts. But, alas, I'm not playing against a bunch of weekend traders that just walk away saddened when they see a big undercut. Just like me they shrug and undercut even more, posting more just to piss the undercutter off. There are also guys that always undercut by 1 copper (part of me wants to strangle them, but I should be happy they don't drive the average price down too much), but there are those that undercut by 40%.

Part of me hates the 1c undercutters more, but in the long run I think they're the smarter ones.

The reality is, it does NOT matter if anyone undercuts big or not. You will get undercut again with the same speed for either. That's on my server, highly populated, with idiots, but also with some damn good players.

The thing is, Gevlon, I'm starting to think you didn't have much competition before. Have you ever thought what would happen if you played your own mirror image? How you would react to your own action if you were on the other side. I'm in that position now. I've got good competition, they don't care about big undercuts, they can go as low as I can. And some of them do camp the AH 24/7.. literally! They always sit besides me when I scan (I tried the trainset, they still won't leave).

I've got some counters, and I'm not saying them, because they're most likely here too. Still they're but patches in a hard fight that's usually only won when you're lucky to post when someone needs. Or when you camp the longest.

The reality is, that the only items that make money are the ones where no idiots have been undercutting big. The items that are, are now so close or even below matsprice, they're not worth the effort anymore. I see tons major glyphs being sold for around 15s, with higest seller starting at around 30g, followed by 5 dumb guys thinking they would scare the rest by big undercuts. Ending with around 10 guys doing minor undercuts from 20s to 15s. So who's the smart one? you tell me.. but I think I know..

Well, at least the customers are happy..

Jeff said...

The only hitch you really run into on this is a server like mine, Earthen Ring. Over time everything on this server moves to the cost of materials, and trust me it is annoying. I am sure if I were more diligent than I am I could make more profit, I have numerous crafters on tap and can get anything made to sell. Even so unless I find a bargain from gold sellers (we have a ton, and often will see hundreds of the same herb/ore/whatever listed at two thirds of market) Even so, within a day or two the price corrects to the new low, so it takes very aggressive inventory management and the ability to turn on a dime.

It is unfortunate you only play on European servers Gelvon, I would love to see how you would handle the madness that is the Earthen Ring Auction House.

Anonymous said...

I remember a while back on my realm some guy bought every Frozen orb on the auction house and relisted them at 140g with a 160g buyout. (They usually sell for 65g on my realm).
As far as I know, none of them sold, because I had gotten two from the Emblem vendor, and listed mine, I listed on at his price and one undercutting him by 20g, and mine didn't sell, so his must not have.

William said...

"Of course there comes the uber-genious who thinks the best move is buying all "cheap" glyphs and sell them higher. While monopoly works sometimes, but never-ever on an item that can be mass-produced. If you see someone buying all glyphs (or armor kits or belt buckles or ammunition or whatever that can be mass-produced), just craft much more. Make him buy more and more, making you rich and making him overrun by unsellable stuff."

Gevlon, you often make statements that are true in some sense, but not necessarily applicable to the WoW economy. I'll provide some clear counterarguments to all your ideas based on my server (US-Tichondrius a High pop server).

William said...

"By undercutting several golds, you simply force the competition to either abandon their precious gold and undercut you or list on "normal" price and then your stuff will sell."

Here's the thing Gevlon, on my high population server no matter how much you undercut the market for a glyphs, there are a whole bunch of other glyph sellers who will simply undercut you by 1 silver. They will do this regardless of if the price is at 30g, 15g, or 5g. The ONLY window of opportunity for selling glyphs is within maybe 1-3 hours after you list them, depending on how lucky you are.



"The other price fixer is simply stupid. He believes that if all sellers would sell for the same price, the buyers would be forced to buy for that price. In that, he is right. However he is very wrong in three things. At first there is no way to make all sellers agree. Just because you agree with the price, a third seller could come and take it all. The fun part is that this third seller could be the alt of any of you."

Here's the thing, there have been many cases where a "third seller" came and attempted to force other sellers out of the market by massive undercutting. Guess who got forced out in the end in every case? Him.

Everytime someone tried to do these mass undercuts, in the end ANOTHER glyph seller would undercut all his glyphs by 1 silver, maybe an hour or two later. In the end he operated at a low profit selling some glyphs at 5-6g/each. Every time, after a week or two these people left the market, usually barely earning much gold at all.

William said...

"In the real world when participating a market can have serious entry cost, such schemes can work for a time. You can't build an airliner overnight. However you can craft glyphs overnight, so if the price is fixed high, someone will come and steal the show. The only way to prevent this if it's you who steal the show."
In fact, while there is no serious entry cost in terms of gold for glyph selling, there IS however a serious time investment required (and knowledge). You cannot really start making serious profit until you've accumulated a large recipe list for glyphs, most of which are from researching one day at a time. You also need a certain mindset to mass produce/sell glyphs, which most people simply do not have. They are more interested in easy/quick money making.



"Secondly, no market is price-indifferent. If the stuff is too expensive, people simply won't buy it. Smart people have stocks and know crafters in their guild, dumb won't mind going to raid in PvP glyphs if PvE glyphs are too expensive. And there are always poor who simply cannot pay. So the higher prices mean less sells."

Of course no market is not price indifferent, HOWEVER, some markets are more or less elastic than others. If a market is extremely inelastic, then there will be only a very small increase in demand if the price drops by a lot. This is the case for the glyph market at least on my server. From my experience, most people see anywhere from 5g - 30g as reasonable price for a glyph. Any higher than 30g, and sales will actually slow down, which is why that is as high as I go. I've tried selling glyphs at 5g, 15g or 30g and every time I get about the same amount of sales, no matter what the price (well maybe, marginally more if the price is lower). I can only conclude that the demand for glyphs is relatively inelastic over this price range on my server.



"Thirdly and most importantly price fixing means accepting only a little share of the market. Having 10-20% of the 50G/glyph profit is worse than having 80% of the 20G/glyph profit."
On my high population server, you will NEVER, EVER have 80% of the market, no matter what you do.

You can try undercutting glyphs down to 5g or even 2g, and you will STILL only have maybe 10-30% of the market. Maybe slightly more, at costs close to mats.

So answer this question. Is it better to have 10% of a 30G/glyph market, or 15% of a 5g/glyph market?

William said...

"Of course there comes the uber-genious who thinks the best move is buying all "cheap" glyphs and sell them higher. While monopoly works sometimes, but never-ever on an item that can be mass-produced. If you see someone buying all glyphs (or armor kits or belt buckles or ammunition or whatever that can be mass-produced), just craft much more. Make him buy more and more, making you rich and making him overrun by unsellable stuff."
Gevlon, there is a difference between attempting to operate a monopoly and the simple act of buying out low cost items and resetting the price at 30g. I will only buy out glyphs once the price is very low on the AH (3-6G range). If they are any higher, I will still undercut them. Every time I do this, I actually make more profit than the person who listed the glyphs at 3G, because in that time space I will sell a few at 30G.

Do the math: 2 sales at 30G = (30-2) * 2 = 56G profit
I would have buy out 28 glyphs of the "mass seller" to give him the same amount of profit. (4-2) * 28 --> 56G profit.

No sane person would ever post that many glyphs, because then you'd have to spend an inefficient amount of time actually spending and posting the glyphs. Not to mention, the bags wouldn't even hold that many.



In the end, Gevlon, we use different strategies that can both work. Buying out glyphs is not "stupid" at all, because I go about it in a smart and calculated way (not like M&S angry letter).

I am sure that my method is just as good if not superior to yours at least on my server. I manually buy/post glyphs just once a day when I first log on (takes about 20 min), and I only need to replenish my stocks about once a week, because the "mass sellers" often provides a portion of it. I picked up inscription sometime in April and have regularly made at least 2K/day from doing this. I believe I hit the gold cap within 2 months of starting my glyph industry. Now after buying my tundra mammoth, bike, Dalaran ring, all of the Ulduar craftables, about 60 different pets and every other mount I could find, I still have 300K gold on my account.

Anonymous said...

I definitely agree that one should undercut by more than a few silver, But I have seen you mention that you undercut by 20-50% of the market price at times. I understand that you are still making a profit by doing this, but driving the price down that far can only hurt you in the long run.

So I'm kinda curious as to your logic when you say that you undercut 20-50% rather than, say, 10-15.

William said...

And lastly, I just wanted to point out what happens when more than one mass undercutter is in the glyph industry like on my server:

http://en.wikipedia.org/wiki/Tragedy_of_commons

They fight each other with their undercutting wars until the market shrinks to almost nothing.

Mark said...

@ william that's exactly what happened on my server and most glyphs were down to 6g or less for a long time.

Additionally I disagree with the way you undercut Gevlon only because I had 90% of my glyph market at 30 to 50g for a good 3 months and was making 6 to 7k a day during this whole time. Maybe on your server cutting 40% makes sense but I had no need to do it and I don't think everyone needs to rush out and do the same without researching their market.

William said...

@Mark

Yup, that's how the market was, until I decided to do something about it. So every time a (sellable) glyph dropped to a low price, I would "reset" the price at 30g. Gradually the price would get undercut down again, at which point the cycle repeats.

DeftyJames said...

In theory you are right (as you are about a lot of things) but wrong in practice. I have made thousands of gold buying heavy stone at 10s a stack and reselling it at 25g a stack. It's easy to mass produce heavy stone, but most people don't want to. Most people who are producing the heavy stone are people who are leveling mining and they just want to dump it. Most people who are now buying heavy stone are people who are leveling blacksmith and will pay lots of gold.

This is market opportunity. One of the keys to making money which you often overlook is market inefficiencies. True, sooner or later I expect others on the server to catch on. But in the meantime easy profits for me.

It's a good thing that you are wrong a lot Gevlon because it means more money for the rest of us.

Anonymous said...

I think the glyph market is different than any other market in WoW. So the "normal" marketing's rules do not apply to it.

The cost for each glyph I make is the price of the parchment and that's it. I can get Ink of the sea for free by doing the following, buying and milling herbs from the AH and selling the snowfall ink that comes out of that. Just that will make me even, making all the inks "free".

Also is important to note that every glyph has almost the same production cost. Either 1 or 2 inks plus the parchment, no more no less.

So if someone is selling a glyph at 70g, why is it stupid to go 40g for the same glyph? I am making tons of profit and I am selling way more glyphs that the other guy can potentially sells.

I have tried different systems with my glyph business and so far the best result has been from selling every single glyph with a fix price of 10g and undercutting by 2% going as low as 80% under the "fixed price"

Before I was selling glyphs from 3g to 70g and I was making around 1K gold a day. Now I am making almost 2K gold a day. I can see the competition walking away and more glyphs are selling cause the prices are lower.

My idea is this, if glyphs are cheap more people are going to be able to afford them and also people are going to be more willing to spend money on trying different glyphs just for fun; thus, selling more and making more profit.

Just my opinion.

Anonymous said...

And yet I do similar profit to what you do by selling high on my server, there are multiple people who are doing just that on my server, we have a semi-formal agreement between the big players to not undercut by more than 1s, the result is that we have a healthy market where most glyphs are in the 10 - 30g and where we all have a similar turnover of 8-10k+ per week while dealing with much lower volume.
I do agree that someone who would follow your rules strictly on my server would "ruin" our nice market, except that he would operate under the same market constraints that we do, ultimately if competition does not give up the only "winner" would be the guy willing to get down to the mat prices and/or able to get flowers under market price, and even that guy would not do a lot of profit...
You are not a god, you are betting that the competition will give up before you do, if the competition is there the only winner is the one who is willing to invest more in destroying competition and this leads ultimately to a pyrrhus victory...

Anonymous said...

I haven't observed much price/market share dependence on my server. (I tried for a few weeks.)

On my server, there are about 4 persistent goblin inscriptionists.
They appear to behave similarly to me. IE, increase posting frequency if g/day < 1k, undercut to a few gold, price reset up to 30 g if no glyphs posted.

My needs are modest, so I've opted to post 3 of each glyph on 48 hr auctions at a small undercut with occasional experiments when I get bored. This seems to maximize gold/hr played, though not gold per day. (I also supplement with a bit of enchanting, since the gold/hr is quite high.)

(a) Experiment (a) -> maximum auctioneer undercut, lowered maximum glyph price ~ 50%. Moderate (30%) increase in market share. # of goblins -> constant. Prices rebounded quickly.
(b) Experiment (b) 2 day -> daily postings -> glyph prices largely unchanged, ~30% increase in # of glyphs sold.

So, thet's why I haven't bothered with large undercuts or frequent reposting. They seem to cut my gold/time played because the other goblins are unwilling to leave the market. I would laugh a bit if anyone complained about undercuts though.

I thought about price-fixing, but there are too many goblins and I'm too lazy.

I would welcome any useful advice for increasing gold/hr...

Oh, and a note, for long-term investors, low-end (undeath and prisms) darkmoon cards were a fun/profitable experiment. These cards are unique in that their sales price/supply is determined by past production. Buying up all the low price cards (<1/16th deck cost) results in a permanent supply shift since no method exists to produce a specific card.
So, I tried it. :) After about 2 months, card pricing mostly equalized and my cost/deck became very low. (~3k investment, but I've sold about 30 decks at 0.5k profit each.) (Only useful for people with cash lying around.) I suspect it'll fail after patch 3.2.

William said...

"PS: many commenters said that in servers with little competition, no AH-players one can pull this trick. I've never claimed differently."

Wrong, did you even read my posts at all? My server is highly competitive with at least 5-6 other goblins who post glyphs daily. However, there isn't really any price "fixing" but more along the lines of resetting.

I'd like you to challenge any of what I or Wooly said.

Anonymous said...

You are not a god, you are betting that the competition will give up before you do, if the competition is there the only winner is the one who is willing to invest more in destroying competition and this leads ultimately to a pyrrhus victory...

Of course I am betting on something, you have to. You are betting that the semi formal agreements remains and that they don't go into their "alt" and screw you over posting for 15g each glyphs making killer profit. I don't believe in "semi formal" agreements because they can't be really monitor by anyone. However, you are making great profits and that is great, your system is working.

The only thing I will add is that you, and I think almost everyone else, make great profit not because the system they created but by finding the system that works in their server (I am not sure if I am making myself clear)

Oh by the way, I didn't know what "pyrrhus victory" was so I looked it up, very interesting.

Best of luck

Althalas said...

I have simialr issues with the Infinite dust market on Anvilmar. There are 6-10 people in the market at a high volume. When the undercutting gets rough I have seen the price of a stack of dust hit as low as 45G.

With dust it's even worse. there is no cost to cancel out and re-list all your auctions. Campers get a lot of sales as they can re-list very often, and with high volume.

The only time I think you should undercut by a large amount in a high volume competitive market is when you want to G NOW. Otherwise undercut by a modest amount and hope it sticks for the 2-3 hours you get be top dog. In that time you will be undercut by a ton of other people.

Thunderhorns said...

I think the glyph market is different than any other market in WoW. So the "normal" marketing's rules do not apply to it.

This is true. When I saw that posting glyphs costs 30 copper, I knew how Gevlon was able to do what he does. You might be able to do the same thing for enchanting mats, but it would be harder to obtain the same quantity as glyphs. One stack of herbs produces around 4 to 6 glyphs.
No other trade skill has that kind of output for one stack of herbs.

Every other trade skill has far higher and harder to obtain material requirements. I seriously doubt Gevlon or anyone could make a similar profit on any other single trade skill with mats purchseable off the AH.

Glyphs are the best market for mass production. Cheap material cost per glyph. High volume. Cheap posting cost. It has everything you could want in a trade skill for maximizing profit.

Anonymous said...

Here is a fun question - what about the guys who undercut to bellow materials cost? The people who farm 17 hours a day and list all glyphs at 5-10g? Are they intelligent in any way? I would argue that not. Undercutting a glyph that normally sells for 20-30g to 15 is fine, undercutting the same glyph to 3-5g can only be done by a non-too-intelligent farmer. Undercutting is good, unless you have people who DO farm for hours and camp AH the rest of the time. You cant make nearly as much around them, profit drops to 1g per glyph on nearly all glyphs. Try to make your 10k gold a week when the AH is filled with all the at less then AH mats cost.

Anonymous said...

Lol, I buy most of my ink (lazy), and I'm more than happy with selling glyphs at 5g each. That's a 250% profit.
Now, as I have the time to check/renew/relist several times a day I don't undercut savagely, I do reset price and I have a highish fallback price. If I didn't have that time I would kill the price, probably cap it at 5-6g per glyph by posting 8 glyphs at that price. I wouldn't care if ppl bought me out - a 5k investment would give me back 12.5k(+). I have a constant supply of ink, so I'd never run out of mats, and with the price always that low I know of a few who would quit the market. If I didn't do that I would sell no glyphs.

Anonymous said...

"And yet I do similar profit to what you do by selling high on my server, there are multiple people who are doing just that on my server, we have a semi-formal agreement between the big players to not undercut by more than 1s, the result is that we have a healthy market where most glyphs are in the 10 - 30g and where we all have a similar turnover of 8-10k+ per week while dealing with much lower volume."

And your point is completely irrelevant due to your agreement. Your situation is nothing like what you replied to.

Anonymous said...

you are all on some crazy servers. Can I join you?

Average material cost to produce glyphs on my server is 5 and a half gold.

Average glyph price on my server it about 6-10 gold.

When dual specs came out I went from selling 30-40 glyphs a day to about 4 glyphs a day.

I actually make more money with BS then I do with my scribe.

Gaelex said...

Those undercutting to half the usual price that has been used for weeks is an idiot because he is screwing his own profit.
Price war can lead to only one thing: nobody makes any profit.
The market will adjust itself because those not liking the profit will change what they do and move to other items that make more gold.
However the market will likely be broken for that undercutting item because it is highly unlikely the price will ever go up to the level they used to be.
Selling 5 items with 2G profit each is pretty much the same as selling 3 items with 3G profit each. Plus less time needed to make the 3 items instead of 5, plus the less risk of having resources blocked in 3 items instead of 5.

Thrifty Tauren said...

Undercutting and relisting definitely can work. I have around 300k gold in four months to prove it, on an extremely active server with very healthy competition.

You can either spend your time getting/milling ink for incredibly high volume or spend some of that time relisting. It all comes down to spending time differently.

Technology certainly helps. I wrote an addon to handle relisting and undercutting. By far more time is spent waiting on mail from the mailbox than anything else, but even then, it is perhaps 10 minutes a day (which you can do mostly alt-tabbed) and one or two days a week making glyphs.

Mr Goblin, you may be sure you know how everything really does work, but your certainty in your own reasoning and absolute view of how the world really works simply means there is much opportunity for others with different approaches to do quite well on their server and yours :) Thank you for being so certain and writing so certainly; hopefully many baby goblins also will make the same mistakes and leave opportunities for others to exploit.

Yours truly,
Thrifty Tauren

Ydraisa said...

"While monopoly works sometimes, but never-ever on an item that can be mass-produced."

In a perfect market this is definitely true. However, what good does it make that a certain item can be mass produced if you don't have the ingredients to back it up?

Let me give you two examples, from my server.

There are 2 entry level cloth blues that are both perfect for level 19 twinks. They sell for at least 10 times the cost to craft them.

However there's a single ingredient that is required by both items (boots and cape) that is rarely in the AH, and only in small quantities: the spider's silk. It can't be effectively farmed since it's world drop from spiders of a certain level, with a small enough drop rate that farming is cost ineffective.

So while all the tailors have the ability to mass produce it - the recipes are learned from trainer and have low crafting skill requirements - there's always a short supply of them by the AH due to the lack of spider's silk.

Second example from my server is the netherweave bags. Their median selling price is around 10g, and they always sell at this price.

However, at almost all times, there's barely 10 - 15 netherweave auctions at the AH, and with prices varying from 7g to 10+g a stack.

Since almost nobody farms Outlands anymore, and farming netherweave is cost ineffective, the only providers are DKs and alts that happen to be there for a few days.

So again, all tailors have the ability to mass produce netherweave bags, yet lack the ingredient to craft it.

Anonymous said...

Gevlon, you are wrong.

You may undercut alot, but every well-populated server will have another mass producer who will refuse to be driven out. They will undercut YOU, until the glyphs are at cost prices. They will drive YOU out of the market, even if they have to camp AH all day long. If you leave - bye, they will set up high prices again. If you stay - you BOTH lose.

At least when you undercut by 1 silver, there is a chance that a few glyphs will sell for a good amount to justify AH camping.

I used to make ~4k a day by logging in just in the morning and posting glyphs. Now it's gone to hell when alot of people picked up, started using your methods and all glyphs are under 5g. Yes they make OK money - maybe 1k/2hours/day, is this worth it to me? (I've made over 500k in the past 5 months, profit, not sales) Hell no. And yes, I've abandoned the industry entirely, there was little point to continue months ago, but I did it because I wanted to see how far I can go.

Your arguments are silly, because you haven't played on a rich raiding server, where very most heavy gold makers are into gems and enchants, not glyphs. Glyphs were a novelty and good while they lasted.

Cheers.

Dionysian said...

I used to be a double-gatherer and I used to be a silver undercutter. It took me months to reach the same conclusions for my myself that Goblin lays out here. Once I did my gold/hr shot up and a much smaller percentage of my playtime was wasted grinding for gold. Now I just link all my friends here when they ask me questions on efficient gold accumulation (saving me even more time). Awesome blog, goblin, keep it up.

Azzur said...

LOL reading some of the comments here.

First of all, I must say that I'm not a big fan of Gevlon and his philosophy. But I'm usually in agreement on his economics posts.

Firstly, there are certain things that are very obvious to him (and to others as well) that he simply assumes that everyone sees it. For instance, he talks about people trying to set up a monopoly on a mass produced item. It's obvious, it's ok to buyout people who have posted items below cost price. He was referring to a monopolist that attempts to buy all items (including those over cost price).

The goal for Gevlon is to undercut until a certain predetermined price (e.g. make 10% profit). Anyone undercutting to ridiculous levels constantly will eventually leave the market because they are making no money from their time investment.

One thing that people need to understand is to use a long term strategy. Improvements to your business comes from fine-tuning the supply chain (e.g. addons, find reliable suppliers, etc) to reduce your own costs (gold, time).

Anonymous said...

I agree with William. Gevlon's theory does not work on a highly competitive market and very populated server.

I happen to be one of those people that under cuts by 1 silver. You can list your glyphs at whatever price you want (30g, 10g 3g) and I will still under cut you. There are several people on my server who will also do the same thing. It's a pity that Gevlon is not on our server so that we can see who gets driven out first.

Taco

Anonymous said...

"
Anyone undercutting to ridiculous levels constantly will eventually leave the market because they are making no money from their time investment
"

No, they won't. They will make YOU leave, instead, because as a goblin, you actually understand time value.

Anonymous said...

What is it you people don't get this is not about making gold now, it is about making gold in the future. In a barren market this method is not needed, but in a very competitive market this method works very well if you can put making profit out of your head

RyanC said...

After your post where you determined that gold (i.e. cash) is the best place to be to avoid inflation, I've stopped taking your economic advice seriously. That is the very definition of inflation, and your post should have been about avoiding items that could deflate while buying items that have inflated in price.

But of course, you swore off that practice a long time ago, right? Speculating down is just like speculating up.

Anyway, not everyone is in the Glyph market where reposting takes hours, and you are literally dropping in hundreds of glyphs.

Setup: I do not have any liquidity needs. With well over 15k in gold at all times, I do not 'need' money...I just have some.

I have a blue-selling business that has funded 2 epic cold-weather fliers, amongst other things. No motorcycles. No mammoths.

The flask market, where I play around in, has exactly 4 items to keep track of, and posting underneath someone else by silvers (and ignoring those who undercut you by Gold) still yields a profit because it's difficult for one person to satisfy demand completely.

Currently, there is a moron who is selling flasks for so low (15g), that he relies on the Flask Master proc for profit. This is in accordance with what you say.

Based on previous AH experience, flasks can support a price level into the upper 30s before people start searching for alternatives.

I am colluding with a friend who also is a flask-master; based off posting history there are 4 real contributors to this market. Minus us, that makes 2.

The price of Lotus, and the profits, are so low now that Lotus has dropped in price too.

So yes, with enough liquidity, we will corner the market. If we can force our competiors to farm, while we keep the AH FREE OF LOTUS

(Again, in Glyphs, you cannot keep the market free of herbs. But when there is ONE key material, we can keep the price artifically high.)

Instead of posting at 14g, and taking a trifling profit, a total reset of the AH will yield a 21g profit. We have enough cash on-hand and are willing to commit a large amount to keep this going.

It is our experiment; in the real world they prevent collusion but my best friend and I are both well to do and determined to show these idiots, and yes, they are idiots, the error of dropping the price 20g below demand.

Since there is no such thing as holding cost (we will be use my bank alts 'guild bank' to coordinate efforts) unlike the real world, holding onto flasks through 3.2 and more importantly 3.3, means we can at least get our money back. So it's a no risk experiment.

To sum: for people looking to inflation hedges, buy some low level blue items (in demand, of course) since the price of those rise relaitve to people's wealth.

Don't give one-size fits all tradeskill advice because Alchemy is nothing like Inscription, which is nothing like Blacksmithing, which is nothing like Engineering.

Alchemy: High volume, Low variety of items, low profit margins.
Inscription: High volume on patch day (low volume otherwise offset by ->), huge variety of items, very high profit margins.
Blacksmithing: Moderate/low volume, high variety of items, low profit margins.
Engineering: ? volume, large variety of items (mostly usable by people with the ability to make the items); moderate profit margins. [Hunter ammo changes on the way do not bode well for this profession]

Fail said...

I am one of those ppl on a high pop US server. Off the top of my head I can think of five big player 1s undercutters. One of these guys in literally online every time I log into the game.

At this point I am pretty much doing the same version of undercutting. I have my fixed value for each glyph set up at around 25g with an undercut of 10s. I play the 48 hour market and usually commit about a half an hour 4 times a week.

I also do what another poster mentioned, which is selling the snowfall for basically the price of a stack of icethorn or lichbloom, so the glyph mats are basically the cost of the paper.

Honestly, for those ppl making 2-4kg a day I salute you. I am happy at this point making between 500-700g a day, meaning every 48 hours I get 1k-1.5kg. There is just way to much competition. Usually just when I finish putting up all of my auctions one of these 1s undercutters log in and I know that I will no longer be lowest auction in 15 minutes.

Lee said...

" can get Ink of the sea for free by doing the following, buying and milling herbs from the AH and selling the snowfall ink that comes out of that. Just that will make me even, making all the inks "free"."

No no no. The Inks are cetainly not free. They may be a serious profit oppurtunity, but they are not free. The Inks cost YOU whatever you could get for them on the AH. If you would take zero gold for them, I will gladly take them off your hands. You have to figure the VALUE of the Inks in your cost to make a Glyph... not how much you spent for it.

If Inks sell for 1 gold each, and the paper cost you 50 silver... your cost to make that glyph is 1 gold and 50 silver. If you are selling that glypg for 1 gold, you are shorting yourself because you could have sold the components individually for more.

Higher profit yes... free no. Glyphs NEVER cost just the price of the paper to sell as the inks have a value no matter how much you already made on the Snowfall Inks.

Fail said...

Lee, If you spend 20g on a stack of icethorn that mills to 5 inks of the sea and one snowfall ink, then sell the snowfall ink for 20g, how much has the 5 inks of the sea cost YOU?

Notmyrealname said...

@fail

I believe Lee is talking about the opportunity cost of selling those 5 inks on the AH instead of turning them into glyphs. From that perspective, the inks aren't free.

Fail said...

But is milling to sell inks logical?

MyName said...

@RyanC:

"Don't give one-size fits all tradeskill advice because Alchemy is nothing like Inscription, which is nothing like Blacksmithing, which is nothing like Engineering."

I agree with that, however, I don't think your short take on the professions is 100% accurate. The big money maker for engineering is pets and guns. The big money maker for JC is meta gems and red gems, and it's funny how everyone on here seems to ignore the BoE offhands for inscription which is just as good as anything other profession only with much less competition.

The key to making gold in this game is to find a cheap supply. Gevlon's method works because he can find a cheap supply of herbs. When I was wanting to make more gold, I spent some time in glyphs and the rest of it finding cheap saronite and extracting all the value I can out of it. You can do that with JC/Alchemy and Engineering/Enchanting (although Engineering is partly dependent on Titanium and Elemental costs as well).

The other thing you have to understand is that competition isn't always the problem. If there are too many people chasing too little demand, the supply price always drops. This is especially true the closer you get to the next expac, which is when nearly everything you have becomes worthless for a few months (until people roll alts again). That's also why cash is the smart choice until you get a look at the new market.

Lee said...

"Lee, If you spend 20g on a stack of icethorn that mills to 5 inks of the sea and one snowfall ink, then sell the snowfall ink for 20g, how much has the 5 inks of the sea cost YOU?"

It cost you 20 gold quite frankly. That you already made that money back selling other products of the milling doesn't change the cost of the process... just the size of the profit. In that line of thinking, you can just as easily say the Snowfall Inks are free... it's just a matter of what you consider first. You wouldn't sell Snowfall Inks at 0 gold each, and you shouldn't sell glyphs at the cpst of the paper either... both lines of thought are losing gold in exactly the same way.

What I was specifically talking about, however, was the oppurtunity cost as was mentioned. You are losing money on that item if you sell it at less than the sum of the parts. Thinking of the value of the components is more important (specific to profit) than the cost to yourself (which in this case is still 20 gold). If you are only considering costs to yourself, then someone out farming mats all day and seeling items at 10% going rate is making 100% profit.
I tend look at it like I would income in any out of game endeavor... maximize income/time. It's why I have someone mow my lawn. I value my worth per hour (and available budget room) against the cost of someone else doing it. If someone else can do it more cheaply than I can, I have them do it while I go do what makes my normal income. Mow my lawn for three hours, or go work for 3 hours and have someone else do it with a profit to show. It's not that far a stretch from in game activities. I know I'll be in game a certain amount of time, with a specific portion of that I can spend on the AH... and try to maximize what I can gain with that given amount of time. So, nothing is free if it cost me time -or- an initial cost... even if I already made a profit from part of it.

I guess my confusion stems from the simple rewording of the original question:

"If you spend 20g on a stack of icethorn that mills to 5 inks of the sea and one snowfall ink, then sell the 5 inks of the sea for 20g, how much has the Snowfall Ink cost YOU?"

The answer to both questions is the same because they ae both products of what you originally bought and thus cost you 20 gold for 5 inks of the sea AND the Snowfall Ink. Selling one or the other first does not change the fact that the other has real value you are losing out on by giving it away. If you sell a glyph at the cost of the paper you are losing money.

Ayonel said...

I work the netherweave bag market, and I had something funny happen to me last week. The three people who are my main competition contacted me to tell me that we need to stop undercutting each other. They said that we should all sell at 11.99.99bid/11.99.99buyout, and then it will all be good. He(the person trying to organize this) even told me that I shouldn't post too much at any time in order to keep supply tight.

Typically, I don't like to communicate with these people. However I responded that it wouldn't work, and that either 1) one of us would undercut the others to take advantage, or 2) someone new would come into the market and undercut all of us.

I then tried to explain how economics work. His response was that the important thing was to keep the price up.(I'm thinking, no, the important thing is for ME to sell bags, and you can all burn.)

Anyway, I posted 10 bags at the agreed price, mostly to watch the fun unfold. Within 12 hours, one of the price fixers was posting at 11.99.98. Within 18 hours, someone new (probably a freshly rolled alt) posted no less than 50 bags at 7.99.

So now we are actually in a worse place than we were before. The price of netherweave has gone up as people arm themselves with materials to fight this war we are waging, and the price of bags has come down to the point where instead of 5-6 gold per bag profit, it's 1-2. Two weeks ago I would see no bags posted, so I'd make a bunch, and they would sell fast. I did 60 bags in three days. Now there are tons.

The funniest thing about it is that I used to just make 15 bags every morning, post them at 11.99.99('normal' market price) and forget it, knowing they would sell over the next couple of days, usually by the time i got home. Heck, I was even moving the price up at one point because supply was low. Now, the other three sellers are so obsessed that within 30 minutes of posting, no matter when I do it, one of them will undercut me with a new posting of bags. We are at 8.99.98 .

RyanC said...

I left my tradeskill summary vague, because at max level I have Alchemy, Tailoring, Enchanting, Herbalism with Inscription 425-ish.

Anyway, cash is positively the WORST PLACE EVER to keep your money, today, tomorrow, and forever.

More gold flows into the game than flows out of it, thanks to questing, etc. Blizzard tries ineffectual gold-sinks to counter this phenomenon, like motorcycles, etc but it's not enough.

Therefore anyone dumb enough to hold cash, will find themselves poor if they don't pay attention.

Consider how much money a person had at the end of Vanilla wow to consider themselves rich, vs. TBC, vs. now.

I work in investments, graduated in Finance, and can assure you, believing cash is a good inflation hedge is like saying eating cake is a good weight loss strategy.

Anyone who sells blues can tell you, you get way more now than you ever have in the past.

I thought BoA shoulders/chests would slow demand, but people are too dumb to buy an item that literally, gives them days of their life back, if they level a guy from 1-80.

Azzur said...

@Ayonel:
There are economics that covers the situation that you're talking about - game theory. Basically, people may be tempted to "cheat" (i.e. undercut) or presevere for long run benefits. The OPEC oil cartel is an example. A member may "cheat" (i.e. produce more) or cooperate with the cartel and benefit everyone. If you're playing a one-time game, the best outcome is to cheat, but in the long-run, cooperating is better.

@ people saying Gevlon's methods won't work on a high-pop server, etc.

Of course they won't always work! In fact, Gevlon never advocated a particular method or technique. What he's saying is that there are ways of making money and it's up to you to find that way. It may be inscription, or some other way.